We’re going to take the following five episodes to go through 5 benchmarks to manage your finances in your 20s. Now, you may not be in your 20s, but this may be an opportunity to make sure that you have hit these benchmarks yourself, or feel free to share the episode with someone you know who may benefit from this content!
If you have been following my content for a very long, you probably know that I am pro-education; actually, more clearly, I am pro the right education. Needless to say, there is a lot of bad advice out there. Whether it’s misinformation, misapplied information, or simply just bad information, people can unknowingly build their lives on strategies that may not actually work for their specific situation.
Although personal finance is well personal to you–I believe there are simple benchmarks to follow in order to set yourself up for financial success, so we’re going to discuss that.
I know there’s a lot of advice out there from influencers who use their platform to speak on topics they may have an opinion on but not necessarily be qualified to speak to. Unfortunately, these self-acclaimed subject matter experts end up leading people down paths they have no business being on.
All this to say, my focus is to help you build margin into your personal finances, which requires that people shift their mindset to approach each aspect of their personal finances. Although I have a lot of experience with corporate and personal finance, don’t just take in the information you hear here or anywhere else but utilize wisdom to filter the good from the not-so-good. Part of being successful in your personal finances comes down to you building in systems that work for you. Systems that will filter out information that could wreak havoc on your personal finances. This will prevent you from just following current trends on handling your money in a way that may be counterproductive to your goals and instead applying evergreen financial advice.
That said, I believe you should be a lifetime learner so that you are better equipped to decipher not only between what’s inherently bad advice but also between the good and the best advice when it comes to your personal finances.
So you’re in your 20s and are trying to educate yourself on the topic of personal finance. A topic that it seems like everyone has strong opinions on. Where do you even start?
I believe that although applied knowledge, experience, and resulting intentionality around decision-making, otherwise known as wisdom, should develop and grow over time. Your chronological age is not necessarily correlated to your maturity.
This is also true with your finances; I know some 20-year-olds who are better with their money than people twice their age.
For example, there is a guy named Lucas that I mentor. He’s 20 and in college. He is working a trades job for a local government contractor while he finishes school. He has his truck paid off and has paid his way through school, so he is not carrying either an auto loan or student loan debt. He has a goal to save $20k this year alone in order to boost his total savings to $50k by the end of the year. He told me recently that he’s planning to pay cash for a house in three years that he can then house-hack.
For those unfamiliar with house-hacking, it’s a method to buy a property and find ways to cut the costs associated with living in that property. Most commonly, I see people Airbnb or rent rooms, covering the majority if not all of their mortgage, taxes, utilities, and upkeep otherwise.
As I helped him establish a budget to operate off of, my first recommendation to him was to build a good defense. That same advice applies here. This ensures that you are living within your means, therefore able to save. You start with an emergency fund of $250, increasing that until you have 6-months of living expenses. You could use something as simple as the 80/20 rule, which looks at saving 20% to pay yourself first that would go first to your emergency fund and then spending the remaining on your lifestyle. Now there are many other approaches to the loathed ‘budget’ process, but at least starting with living within your means and saving 20% of your income will be a great start!
Now, often I hear people talk about how that saved money is so difficult not to spend on wants.
For example, Lucas wants to upgrade his older Tacoma to a 2022 model next year. Now, this would completely hijack his housing plan if he goes through with it, but he will need to make a decision on whether he will delay that gratification. So I would recommend knowing what you are saving for and how much so that you are not tempted to spend on something that may derail your financial plan.
CTA: So my call to action today comes down to applying benchmark #1, live within your means, saving a set amount in order to have an emergency fund, then press beyond that savings goal to find what you are saving for.
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